SchansBlog

Thanks for coming! I plan to post a lot of interesting articles and comment on a wide range of things-- from political to religious, from private to public, from formal writing on public policy to snippets on random observations.

the (Ohio River) bridges toll for thee

Should it be the massive "Ohio Rivers Bridges Project", a single East-End bridge, or no additional bridges for the foreseeable future?

Beyond that, if we're going to build a bridge or two, how should we pay for it? To what extent should it be financed by Kentucky and Indiana — as opposed to taxpayers elsewhere in the country? And to the extent that it's financed by our two states, should it be financed through general revenues, by an increase in a particular tax, or with a “user fee” — i.e., tolls?

In terms of both equity (“fairness”) and efficiency, user fees are attractive since the burden falls on those who use it. It is generally considered “fair” that those who use something should be the ones to pay for it. And a user fee lines up incentives nicely. People will use it as they value it. In contrast, a price of zero encourages “too much” use.

Economists also like user fees because the cost of government activity is far more transparent. When taxation is more subtle, people are often fooled into imagining a free lunch from the government.

But user fees can also have a disproportionate impact on those with lower-incomes. Of course, a user fee is "proportionate" per trip; everyone pays the same toll. But it will be "regressive" if it imposes a larger percentage burden on those with lower incomes.

In practice, a user fee on bridges is probably "U-shaped"— with the largest impact on the middle class and smaller (percentage) burdens on the poor and the wealthy. Many of the poor don't cross the river that often — and the wealthy don't cross it much more often than those in the middle class.

The impact on those in various income classes is an important consideration. But again, a user fee should be viewed in light of the alternative taxes. Are tolls more painful than a sales tax, a higher tax on income, or higher taxes on property? Proponents of a bridge or two should be clear about both the benefits of building and the costs of funding. And opponents of one funding mechanism should consider whether the alternatives are better.

All that said, the most surprising part of the debate has been the points of contention raised by some self-styled "liberals".

For example, they have complained about the potentially regressive impact of tolls. But I don't hear them complain very often about federal payroll taxes on income — 15.3% of every dollar earned by the working poor (more than $3,000 from someone supporting a family at the poverty line).

I also don't remember much applause for former Governor Ernie Fletcher who worked with the legislature to change the state income tax in Kentucky. The Commonwealth had been the worst in the nation in this category, but they no longer tax the earnings of the working poor.

At least in Indiana, some liberals are complaining about the impact of such a tax on the business community. This is unusual. But I’m excited to see them recognize the negative impact of taxation on microeconomic incentives and macroeconomic growth—at least in this one case.

I'm also glad to see these people promoting "free trade" between Indiana and Kentucky. In many other contexts, they work to restrict trade with those in other countries. Likewise, this is a bit surprising, since many of them promote "buy local" campaigns — and a toll would certainly encourage people to stay in their own states to make purchases.

Finally, many liberals would like us to reduce driving, traffic, and air pollution—to help the environment. Tolls would do that—and would promote carpooling, mass transit, and bike-riding too. Why don’t they consider tolls to be a wonderful idea?

There are legitimate reasons to oppose multiple bridges and tolling as a funding mechanism. But it’d be nice to see more consistency from those who oppose these ideas.

Tuesday, November 23, 2010

Page One practices corporate censorship

Oh well...

First, it was Barefoot and Progressive. They had some interesting things to say-- amidst the "progressivity", heavy doses of fundamentalism, and some funny/sad flailing. But they liked their ad hominems and other forms of shouting. So, being censored by them was hypocritical, but not surprising.

This morning, I made two quick, easy comments at Page One (here and here):

1.) "A lot of people think throwing more money at K-12 education will work too."

in response to his "Throwing Cash At Eastern Kentucky Won’t Fix It"

AND

2.) "Were Bush, Obama, and the Democratic Congresses intentionally sabotaging the economy the last three years?"

in response to his "What? Republicans are intentionally sabotaging the economy for 2012?"

Before his second comment (reiterating that I'm "done" on his blog; I guess he wasn't kidding!), I had already posted this in reply/explanation to him saying I don't have a clue about poverty [!] and labeling me a "teabagger".Right, generally speaking, throwing money at each problem is not going to work.

I'm not sure I qualify as a teabagger; I'm a Libertarian. As a labor economist with a book on poverty and public policy, I'd estimate that I have half of a clue.

He deleted that comment-- out of anger or in trying to limit potential embarrassment.

My email dealings with Jake have been limited but friendly enough. He has a policy not to allow links in his comments without prior permission. I forgot about that a few times (since that is so rare) and so, I would ask about that and get permission.

I think Jake has, by far, the most informative blog in Kentucky on matters political. So, it's a shame to see him engage in this sort of thing. Unlike B&P, he doesn't take things (as) personally and is (more) professional and objective.

But apparently, this morning, someone crapped in his corn flakes or I stepped on a nerve with what should have been an innocuous comment.

As I move on to other uses of my time, I wish him well-- and hope that he will experience the grace and peace of Christ.

UPDATE: Page One responded with silliness, defensiveness, and ad hominems. "Multiple" apparently means once-- and then one more time, after I made the comment that was deleted. They delete a comment and then talk about leaving my comment up. And of course, they have the right to delete what they want. But they're making money and practicing censorship, so what else do you call it: objective, professional, liberal?

Monday, November 22, 2010

not knowing that you don't know: "anosognoism" and the economics of information

This first part was excellent; I've used the idea in my classes to help with the importance of (imperfect) information and its impact on economic markets. It is typical to talk about contexts in which information is asymmetric and leads to something akin to monopoly power. For example, the seller of a used car has more info about the car than prospective buyers.

Two interesting things result: 1.) it's less intuitive, but sellers are also harmed, since they cannot credibly commit (at low cost) to the quality of what they're selling; and 2.) the market tries to deal with the information asymmetries.

Beyond the information asymmetries I know about, a far more damaging/dangerous problem is information asymmetries of which I am unaware. That's the subject of this essay...

Morris opens with a terrific anecdote, from David Dunning, a Cornell professor of social psychology, who studies this. A bank robber is arrested soon after his crime, but can't believe they caught him. Why?

Wheeler had walked into two Pittsburgh banks and attempted to rob them in broad daylight. What made the case peculiar is that he made no visible attempt at disguise. The surveillance tapes were key to his arrest. There he is with a gun, standing in front of a teller demanding money. Yet, when arrested, Wheeler was completely disbelieving. “But I wore the juice,” he said. Apparently, he was under the deeply misguided impression that rubbing one’s face with lemon juice rendered it invisible to video cameras...

As Dunning read through the article, a thought washed over him, an epiphany. If Wheeler was too stupid to be a bank robber, perhaps he was also too stupid to know that he was too stupid to be a bank robber — that is, his stupidity protected him from an awareness of his own stupidity.

ACLU stands up for pro-lifers

It's not every day these columns praise the American Civil Liberties Union. Even less often will you find the ACLU standing up for pro-lifers. That, however, is exactly what's happening in Ohio—and it tells us a great deal about threats to conviction and free speech in modern American politics.

The ACLU Ohio's client here is the Susan B. Anthony List, or SBA List, a political action committee whose top goal is to elect pro-life women of either party to Congress....

During the campaign, the SBA List planned to erect billboards saying, "Shame on [Ohio Rep.] Steve Driehaus! Driehaus voted FOR taxpayer-funded abortion." Before that could happen, however, Mr. Driehaus filed a complaint with the Ohio Elections Commission (OEC) saying the SBA List wording violated a state campaign law against "false statements."

Enter the ACLU Ohio. Carrie Davis, one of the local ACLU lawyers defending the SBA List, directs me to an amicus curiae brief that minces no words: "The people have an absolute right to criticize their public officials, the government should not be the arbiter of true or false speech, and the best answer for bad speech is more speech."...

Whichever side you come down on, surely we can all agree that it is outrageous that an unelected body of political appointees is deciding who's telling the truth in a campaign.

"The mere allegation creates a chilling effect on speech," says Ms. Davis. "The case may go on and on, but the damage is already done."

So hooray today for two women: for Mrs. Dannenfelser and the SBA List for speaking up for life and holding our pols accountable—and for Ms. Davis and the ACLU Ohio for standing up for their right to do so.

Friday, November 19, 2010

the decline of newspapers: "creative destruction" or "market failure"?

Former student Ed Lopez in the The Freeman on the decline of newspapers and wrestling with whether this is "creative destruction" or "market failure"...

Over the past year there has been a flurry of government-related activity aimed at stopping the decline of the newspaper business. The Federal Trade Commission (FTC) has held three series of workshops on the subject...released a discussion paper titled “Potential Policy Recommendations to Support the Reinvention of Journalism”, and a week later it held a workshop at the National Press Club, “How Will Journalism Survive?” to discuss its proposals.

This activity has focused on two issues. First, traditional news-producing businesses aren’t making the money they used to make because of competition from new kinds of outlets. Second, this allegedly is a market failure...

Regarding the second, the FTC argues that journalism is a public good, that the severe contraction of the industry proves that the market has failed, and thus that even tirelessly experimenting entrepreneurs have been unable to find new and sustainable streams of revenues for news organizations, especially for traditional newspapers and their online extensions.

Lopez then cites paragraph 15 of the FTC paper...

The news is a “public good” in economic terms. That is, it is non-rivalrous (one person’s consumption of the news does not preclude another person’s consumption of the same news) and non-excludable (once the news producer supplies anyone, it cannot exclude anyone). Because free riding is usually easy in these circumstances, it is often difficult to ensure that producers of public goods are appropriately compensated.

By my count the FTC report contains 30 potential policy proposals, ranging from major new programs to tweaks of existing interventions. I have categorized most of the proposals into six broad areas [where the federal government might artificially help the industry-- at the expense of others].

Raise revenues to news organizations...

Reduce costs to news organizations...

Increase current funding of journalism...

Create new federally funded programs...

Offer tax preferences to news organizations...

Harvest new funding mechanisms for earmarked spending on news organizations...

This is what the best and the brightest have been up to....

Since there isn’t enough space here to talk about all the implications of the FTC report, I will focus on the economic argument that lies at the core of these proposals...

History shows us repeatedly that public goods are often and perhaps even usually provided voluntarily—without mandate or subsidy from government. Toll charges [for] roads and bridges...Beekeepers and orchard growers...Casino hotels in Las Vegas provide free self-parking and security...Neighborhood police forces...

But what about the losses to news producers? This is not pleasant to see unfold, but it is not a market failure. A policy-relevant market failure is the experience of real net losses in society as a result of purely self-regulated voluntary action. When people choose to move away from lighthouses and newspapers, it’s because they’re moving to new and better substitutes. The lighthouse’s loss has been society’s gain....

Market-failure theory is of no help in understanding how markets really work and what is happening to journalism. A better framework is creative destruction. Old journalism is failing not because it is a public good that government has not adequately funded. It’s failing because it is being replaced with more innovative alternatives.

Wednesday, November 17, 2010

walking by faith

Another aspect of faith and practice is captured in Hebrews 11:8-- "By faith Abraham, when called to go to a place he would later receive as his inheritance, obeyed and went, even though he did not know where he was going."

For the last six weeks, Tonia and I have been taking care of two twin boys who will be two years old in December-- in a pseudo-foster-care arrangement. People hear about this and think that we're somewhere between amazing and crazy. But, to us, it's no big deal. (It's some work; don't get me wrong on that!)

Part of what made it easy to say yes: For years (a decade?), I've had a vision of us having twins. It was never defined, but we were looking for it in our pregnancies and (future?) adoptions. Therefore, when we got this call, it was a no-brainer for us. We don't know whether there will be another-- or a further-- fulfillment of the vision. But we're quite "confident" that we're answering a divine appointment.

We don't know where this will end up. But we're happy and blessed to be along for the ride-- and working to bless God and others through our actions. We're pleased to see our children respond to this opportunity so well and to be blessed by it as well.

public sector labor unions

The impact of labor unions is often seen as uniform over history. But today, labor cartels are less useful, since labor markets are more competitive. And it is increasingly difficult for unions to achieve their goals, since product markets have become far more competitive.

Likewise, unions are often seen as uniform in terms of members. The stereotype is a Teamster. But you can find union members in orchestras and Hollywood. Doctors, dentists and lawyers are in union-like arrangements. One can find union members in blue-collar private-sector jobs and white-collar public-sector jobs.

This last distinction has become more important in recent years. As private-sector unionization has become more difficult, public-sector unionization has grown in prominence. This should not be surprising. Private-sector unions are increasingly constrained by profit-maximizing firms in ever-more-competitive markets. But public-sector unions operate within the looser constraints of government, often in entities with significant monopoly power.

The growth of government jobs has been quite impressive in recent decades. But the trend in civilian agency (non-military) jobs accelerated over the last decade — from 1.1 million in 2001 to 1.2 million in 2008 and 1.4 million in 2010, growing dramatically during the Great Recession.

Related to the growth of government jobs, we've seen rapid growth in public-sector union membership. In 2009, for the first time, membership in public-sector unions exceeded that in the private sector. (Because there are still many more private-sector jobs, the public sector's unionization rate is far higher: 37.4 percent versus. 7.2 percent.)

Current events have pushed the issue of public-sector unionization toward the front burner. In Bell, Calif. (population 37,000), residents were furious to learn the city manager had compensation of $1.5 million, while many other municipal employees had outrageous salaries.

But a far larger issue is lucrative pension benefits. This has a tremendous impact on state and local government budgets and is a threat to their solvency. Steven Greenhut, an investigative reporter, has estimated that 20 million government workers and retirees are owed $2.37 trillion.

More broadly, public-sector compensation is much higher than in the private sector. According to the Bureau of Labor Statistics, state and local government workers received compensation that was almost 50 percent more than private-sector workers in 2009. And according to the Bureau of Economic Analysis, the compensation of federal government workers is more than double the private sector.

Such broad comparisons are not ideal, since job types differ. A better comparison is between the same jobs in each sector — where public-sector workers make $7,600 more in salary and $38,500 more in compensation.

Another objective measure is “quit rates” — the rate at which one voluntarily leaves one place of employment for another. Government employees have low quit rates, a sign of above-average compensation, since they find their current arrangements so attractive.

The flip side of quitting is being laid off. In 2009, private-sector union membership dropped by 10 percent in one year. Meanwhile, public-sector unions have done fine, the difference being jobs with government providing economic “shock absorbers.”

The perverse irony is that fewer private-sector workers are bearing an increasingly onerous burden — from a growing number of relatively expensive public-sector workers — with higher and higher taxes. How long can this last?

The field of Public Choice economics predicts that public-sector workers will support politicians who support them — an unfortunate arrangement that comes at the expense of taxpayers and consumers of government services. Private-sector unions are famously adversarial — as they work to extract gains from firms (and consumers) and promote legislation that restricts their product and labor market competition. In contrast, public-sector unions are collusive — as they work with politicians to benefit themselves at the expense of taxpayers with deep pockets because they pay little attention to politics.

But any ignorance or apathy among voters will probably fade as state budgets are increasingly pinched and as the pension issue becomes an even more obvious problem. Likewise, concern about Social Security and Medicare will continue to grow at the federal level. In a season of economic and political worries, it's sobering to note that some of our biggest public-policy problems are just starting to register on the radar.

good for Steve: GOP leader Bosma chooses two Dems as committee chairs

New Indiana House Speaker Brian Bosma said Tuesday that he wants fellow lawmakers to put vicious election campaigns behind them and move to a new era of bipartisan civility — and said he’s doing the same as the GOP leader appointed Democrat Steve Stemler of Jeffersonville and another Democrat to head committees.

Bosma said it's the first time in state history that the majority leader has asked minority members to be committee chairs, a job that carries the power to determine which bills move forward.

Republicans won control of the House in the Nov. 2 elections and now hold 60 out of 100 seats in the typically rancorous and divided chamber.

“I'm serious about bipartisanship,” said Bosma, R-Indianapolis. “I intend to make it work.”

Bosma named Stemler to lead the commerce, economic development and small business committee and Rep. Chet Dobis, D-Merrillville, to head a new committee focusing on reducing government regulations and laws....

[Patrick] Bauer, now the House Minority Leader after Democrats lost their slim majority, didn't immediately buy into the idea of everyone peacefully working together. He suspected Bosma wanted Democrats on the committees so he could spread the blame for any politically-charged bills that might become election liabilities.

Tuesday, November 16, 2010

money can buy you happiness-- up to $75K

I became aware of the "threshold principle" when reading Charles Murray's awesome public policy book, In Pursuit of Happiness and Good Government. Often, the relationship between an independent variable and a dependent variable is not linear or even simply non-linear. Instead, there is very little relationship between the variables over most of the range of the data. But if you get to a threshold-- too much or too little-- than the variable suddenly matters a lot.

So, one might apply this to what constitutes good/bad parenting, teaching, or diet. Over significant ranges, there may be little relationship between "better" X and better outcomes.

They say money can't buy happiness. They're wrong. At least up to a point.

People's emotional well-being -- happiness -- increases along with their income up to about $75,000, researchers report in today's edition of Proceedings of the National Academy of Sciences.

For people making less than that, said Angus Deaton, an economist at the Center for Health and Wellbeing at Princeton University, "Stuff is so in your face it's hard to be happy. It interferes with your enjoyment."

Deaton and Daniel Kahneman reviewed surveys of 450,000 Americans conducted in 2008 and 2009 for the Gallup-Healthways Well-Being Index that included questions on people's day-to-day happiness and their overall life satisfaction.

Happiness got better as income rose, but the effect leveled out at $75,000, Deaton said. On the other hand, their overall sense of success or well-being continued to rise as their earnings grew beyond that point....

Kahneman, a Nobel Prize-winning psychologist, and Deaton undertook the study to learn more about economic growth and policy. Some have questioned the value of growth to individuals, and Deaton said they were far from definitively resolving that question...

"The New Jim Crow"

...provides evidence that legal defense for the indigent is not what it should be, that plea bargaining and justice often do not go together, and that sentencing rules for minor drug offenses should change.

But that's not all: Conservatives should pay attention to this book because it challenges many assumptions about both race and drugs. Both 15-year-old African-Americans on the streets and 30-year-old whites in public defender offices know what many of us don't want to admit: that race plays a significant role in the criminal justice system. Another hard admission, because I don't have an alternative to recommend: The war on drugs isn't working, not only for all the readily visible reasons but because it rips apart families...

At the end, Olasky calls for "a recognition by more Christians that the people who have been most penalized and stigmatized by the war on drugs are worthy of our concern".

Mildred Jefferson-- African-American pro-life trail-blazer

Mildred Jefferson, the first African-American woman to graduate from Harvard Medical School and the pro-life trailblazer who helped found the National Right to Life Committee and served for three years as its president, died Oct. 15 at age 84. Jefferson's tireless fight against abortion began in 1970 after the American Medical Association decided its members could perform abortions if the procedure was legal in their states—a stance Jefferson said violated the Hippocratic Oath...

war on teachers?

All sides of the educational policy debate now accept that the key determinant of school effectiveness is teachers—that effective teachers get good achievement results for all children, while ineffective teachers hurt all students, regardless of background. Also increasingly accepted is that the interests of teachers unions aren't the same as the interests of children, or even of most teachers....This is not a war on teachers en masse. It is recognition of what every parent knows: Some teachers are exceptional, but a small number are dreadful. And if that is the case, we should think of ways to change the balance.

My research—which has focused on teacher quality as measured by what students learn with different teachers—indicates that a small proportion of teachers at the bottom is dragging down our schools. The typical teacher is both hard-working and effective. But if we could replace the bottom 5%-10% of teachers with an average teacher—not a superstar—we could dramatically improve student achievement. The U.S. could move from below average in international comparisons to near the top.

Teachers unions say they don't want bad teachers in the classrooms, but then they assert that we can't adequately judge teachers and they act to defend them all....

So we are seeing not a war on teachers, but a war on the blunt and detrimental policies of teachers unions....

The bottom line is that focusing on effective teachers cannot be taken as a liberal or conservative position. It's time for the unions to drop their polemics and stop propping up the bottom.

Indiana is one of several states that require civil asset forfeiture proceeds to go to a fund for public schools. Many states passed such laws in the late 1990s after media and public backlashes against civil forfeiture abuse. The states saw the funds as a way to remedy the incentive problems that arise when police and prosecutorial offices benefit directly from the money they seize. In Indiana, the requirement is actually written into the state's constitution.

But there are ways around these requirements...Given all of these ways around the law, how much forfeiture money is actually getting back to the school fund in Indiana? Almost none.

Of Indiana's 92 counties, just five have paid any forfeiture money into the school fund over the last two years. Three of those made just one payment. One county made a single payment of $84.50. Only one county could arguably be seen as complying with the law: Wayne County made 18 payments totaling $38,835.56.

The total amount of forfeiture money paid into the account from all 92 Indiana counties over the two-year period was just $95,509.72.

It's apparent that prosecutors and judges in Indiana know they're gaming the system. For example, in a follow-up to my Reason piece, Gambill told me that he was suspicious of the motives of Putnam County Circuit Court Judge Matthew Headley in Anthony Smelley's case...

Civil asset forfeiture is an unjust, unfair practice under any circumstance. The idea that the government can take someone's property on the legal fiction that property itself can be guilty of a crime is an invitation to corruption...What's happening in Indiana, where the entire legal system is essentially ignoring the spirit if not the outright letter of state law, only confirms that once you give government license to steal, it's very difficult to wrest it back.

biodegradable and bad for the environment

From World on those "unnaturally noisy (and allegedly biodegradable) SunChips bags...

With manufacturing factored in, researchers found that four types of bioplastics were the worst contributors to ozone depletion, compared to seven traditional plastics....more carcinogens, more energy-intensive, and, because they relied on plants, increased pesticide and fertilizer use....

Wars in Iraq and Afghanistan estimated to cost $3 trillion

In the abstract, Edwards notes that "the wars in Iraq and Afghanistan are in their eighth and tenth years, having accrued nearly a trillion dollars in direct military costs." From there...

I review the history of cost forecasts for these ongoing engagements, highlighting the differences across them in scope and accuracy, assessing the methods and practice of cost forecasting, and exploring the implications of the war costs themselves. Besides the unanticipated length and breadth of the military conflicts themselves, a related and equally important component of costs is the life cycle of costs associated with caring for veterans....

Doherty provides more detail, noting that the cost of a war follows an inverted-U-shaped pattern-- with costs that peak well after a war ends.

Bush and Obama: birds of a feather on the military (revisited)

During his presidential campaign, Barack Obama criticized the Bush administration for its excessive secrecy, noting that it had "invoked a legal tool known as the 'state secrets' privilege more than any other previous administration to get cases thrown out of civil court." Obama also promised to end "extraordinary rendition," a practice through which "we outsource our torture to other countries."

But last week the Obama administration used the state secrets privilege to block a lawsuit by five former captives who say they were tortured as a result of extraordinary rendition. Although candidate Obama surely would have been outraged, President Obama is for some reason less concerned about abuses of executive power.

"To build a better, freer world," Obama the candidate wrote in a 2007 Foreign Affairs essay, "we must first behave in ways that reflect the decency and aspirations of the American people. This means ending the [practice] of shipping away prisoners in the dead of night to be tortured in far-off countries."

It turned out Obama meant that he, like his predecessor, would seek assurances that detainees transferred to other countries would not be mistreated. After all, why would governments that routinely torture their prisoners lie about it?...

An administration that was truly concerned about excessive secrecy would have waited to see if either side in the lawsuit actually needed privileged information to make its case. Instead Obama, like George W. Bush before him, insisted that the mere possibility was enough to deprive torture victims of a legal remedy...

Given President Obama's plans to continue extraordinary rendition under a different name, you can see why he'd rather not delve into questions like these. But candidate Obama told us to be wary of presidents who use national security as a cover for violating people's rights.

the Post Office takes $110 from the average family of four last year OR it depends on your definition of "relentless"

The financially troubled U.S. Postal Service reported an $8.5 billion loss in the fiscal year that ended in September and said it will run out of money in 2011 if economic conditions don't improve and Congress doesn't act.

A drop in first-class mail deliveries contributed to an overall 6 billion-piece decline in mail volume last fiscal year, to 170.6 billion pieces, officials said. Financial losses also came from about $5.4 billion in obligations to pre-fund future retiree health benefits and about $2.5 billion paid to the federal government's workers' compensation insurance fund....

The Postal Service also announced Friday that it plans to deplete its $15 billion line of credit with the U.S. Treasury by borrowing the remaining $3.5 billion. Although the Postal Service does not use taxpayer funding, it has tapped the credit line since the early 1990s. Depleting it means the Postal Service probably will go broke at the end of fiscal 2011 unless Congress takes action, members of the Postal Service Board of Governors said Friday....

"We will continue our relentless efforts to innovate and improve efficiency. However, the need for changes to legislation, regulations and labor contracts has never been more obvious," Corbett said.

lunch (and holding hands) with Helen Thomas

I was in DC last weekend for a conference-- and had the occasion for a "brush with celebrity".

My friend Michelle has befriended and is doing a book project with Helen Thomas, the until-recently-inveterate White House reporter. Her tenure spanned from JFK to Bush II-- and she (along with Sam Donaldson) became relatively famous for trying to mess with Reagan. She was a pioneer for women in the news industry, particularly with respect to national politics.

This summer, she said things that are politically unpopular about Israel-- and expressed them in a manner somewhere in between politically-incorrect and crazy. She resigned under pressure from her post as she neared her 90th birthday.

The three of us ate at a little French restaurant in Georgetown. I held her hand and supported her, getting from the car into the restaurant.

During lunch, we mostly alternated between Eric/Michelle stories and hearing Helen talk about Presidents and their press secretaries. (She loved JFK and deeply respected LBJ. She had mixed things to say about the other presidents. Of press secretaries, she said that they all lie, but some work harder at it than others.)

Afterward, my friend expressed disappointment that I didn't talk more about policy with Helen. But that was a lost cause. Near the beginning, I tried to float a "progressive" idea-- my disapproval about the onerous burden of payroll taxes on the working poor. But she was all in favor of that. In a word, she loves as much government as she can get-- except for military action.

Badgering a 90-year-old statist didn't seem like a good idea to me, but sticking to her White House memories, we had a good time.

Thursday, November 11, 2010

the first case of intracellular symbiosis

A clue about the single-celled alga Oophila amblystomatis can be found in its name: It means "salamander egg lover."...these algae have been known to enjoy a mutually beneficial relationship with the offspring of the spotted salamander...live inside the egg sac of the embryos, which grow more quickly because of the oxygen and carbohydrate produced by the algae during photosynthesis. In turn, the algae feed on the nitrogen-saturated waste of the embryo.

...now have scientists noticed Oophila lurking inside the embryo itself—in its very cells...speculate that the algae are passed directly from mother to egg.

confusion about the Kochs and all that wild Libertarian political power

Back in 2008, if you pressed a libertarian planning to vote for Barack Obama, chances are he’d yelp out the name Austan Goolsbee...

Two years later there probably isn’t a libertarian-leaning person on earth who still thinks Obama has it in him to pull a Nixon-goes-to-China when it comes to downsizing government. The president has followed up George W. Bush’s big-government disaster with a big-government catastrophe...And every day on the hustings in advance of the Democrats’ midterm drubbing, Obama campaigned against a wholly fictional Bush record of deregulation and spending cuts....

And what about our University of Chicago hero Austan Goolsbee? In September he became chairman of the president’s Council of Economic Advisers...[and] trashed the most influential donors the libertarian universe has ever seen: Charles and David Koch, funders of the Cato Institute, the Mercatus Center, the Institute for Humane Studies, and much more...

...the administration has continued to single out the Kochs for criticism...in a way that the right focused on George Soros during the Bush era: as a shadowy, self-interested, all-powerful bogeyman attempting to hijack American democracy....

If these attacks appear to lack a consistent theme, it’s because Democrats need the Koch bogeyman to accomplish so many political tasks....

What a long, strange trip it has been for the Kochs. In 1980 David Koch was the vice presidential candidate of the Libertarian Party...I can’t help but smile at what this weirdly asymmetrical conflict symbolizes. There are millions of people—including me, including the Kochs, including people who have never heard of the Koch family—who feel some basic affinity for the notion that that government is best which governs least....

Yet libertarians are supposed to be a threat to the republic. Just imagine if we had any political power!

Armey on the GOP (hopeful) and Clinton/Gingrich (wow)

The caption opening the article expresses Armey's hope: "Former Rep. Dick Armey says the 2010 election will have more lasting effects than the 1994 'tsunami' because this time it's about ideas"

I'm not nearly that optimistic-- and I would guess that they said it was about ideas back then-- but we'll see...Will the upcoming election be another 1994? Better than '94. It is the most authentic and widespread grassroots uprising that I have ever seen. It is about ideas, not about personalities—no allegiance to persons or political parties, but to the great ideas, starting with the Constitution of the United States. It is also an internet phenomenon. Poor old Al Gore has to live with the fact that he was the inventor of the demise of the left...

Did you know about Newt Gingrich's extramarital affair? Who did know? When I heard that Newt had been carrying on an affair for all the years that we'd worked together, I went home and said, "Honey, I had no idea about this." She said, "Of course not. You're the last person in town Newt would have wanted to know about this."...Newt and Clinton actually developed sort of a bond over it. They had many meetings that we didn't know about where they'd drink wine and smoke cigars and talk about their girlfriends....

trying to buy the votes of senior citizens?

Can our retired readers be bought for $250? Apparently President Obama thinks they can, because two weeks before Election Day he has endorsed sending bonus checks for that amount to the nearly 58 million Americans on Social Security...would cost taxpayers close to $15 billion...

It's hard to imagine a more blatant vote-buying exercise, especially with polls showing that seniors have turned sharply against the Democrats this year....

The excuse for this bribery is the announcement by the Social Security Administration that, for the second year in a row, seniors will not get a cost of living increase in 2011. Prices rose by only 1.5% in the last year, having fallen nearly 2% in 2009, and seniors aren't supposed to get an increase until prices exceed their last peak.

But lest you think this is a grave injustice, Social Security recipients received a 5.8% increase two years ago. That was the largest increase in 20 years and was based on what proved to be an ephemeral increase in energy prices. Thus for 2009 seniors received a bonus increase of about $500 above inflation.

Congress sent seniors a $250 check last year to make up for the lack of a benefit increase, and as part of ObamaCare it is sending another one this year to seniors whose drug purchases exceed $2,830....

...what seniors really need is a return to more robust economic growth and more normal interest rates, and that cause won't be helped by the government adding to its already destructive tax and spend record.

Interestingly, it was supported by Bill Gates-- and especially, by labor unions (two-thirds of the funding and most of the energy). A great observation on that from William McGurn in the WSJ:

In a day when organized labor claims more members in government than in the private sector, it's not surprising to learn that public-employee unions are front and center. Their leadership raises a question asked by beleaguered taxpayers across America: Do state budgets exist to serve their citizens or their government employees?

If you read the talking points, the unions are involved in this initiative because they see it as the only way to maintain vital health-care and education services...Here's a better way of putting it. By taxing others, these unions want to insulate the governor and the legislature from having to make difficult choices about what the government should fund and what it might cut back.

political dead ends

one more thing Bush and Obama have in common

Their policies have been quite similar in type-- in not in extent.

Bush extended Medicare; Obama has health care reform. Bush went after Iraq and Afghanistan; Obama more or less continues along the same path. Bush and Obama pursued big spending and deficits. Bush and Obama both tried stimulus to fix the economy. Bush and Obama have both been a profound disappointment to those on both ends of the political spectrum. For former, avid supporters, both have become a bit of an embarrassment.

Yes, I know they're not equivalent-- even roughly so. But the similarities are still surprising.

Here's another similarity: Both were willing to crush their political party for the sake of something that they saw as far more important. In the case of Bush, it was the misguided approach to Iraq and the beat-down experienced by the GOP Congress in 2006. In the case of Obama, it was health care policy and the beat-down just dealt out to the Democratic Congress. Both presidents supported unpopular policies, but these were both seen as more important than an election.

Depending on your view, such stubbornness translates to standing on principle or drowning in stupidity. For the politicians impacted by the deluge, it would not be surprising to find them less willing to stand on principle to avoid the drowning. (See: the recent reports on Mitch McConnell trying to persuade President Bush to reduce troops in Iraq in 2006.)

Of course, it's more complicated than that. Bush and a GOP Congress also irritated people with spending, deficits and the handling of the Flood of New Orleans. Obama and a Democrat Congress have irritated people with even higher spending and deficits, and so on.

But both men were "leaders" in the sense of pushing for what they though was right. In a sense, they can be commended for that-- even though both were wrong.

the faith of theists, deists, and atheists-- and conservative vs. liberal

Faith is the gap between evidence/reason and our inferences. It is evident in every aspect of life-- from driving across a bridge to our beliefs about history.

In a more religious sense, Hebrews 11:1 says that "faith is confidence in what we hope for and assurance about what we do not see". And so, faith of some sort is necessary in embracing and trying to understand something that is, by definition, beyond us.

"Blind faith" is the assumption of an inference with no evidence/reason. Again, this can be evidenced in many areas of life. To note, I can have a blind faith in God or I can have a blind faith that there is no God.

Atheists and agnostics are unwilling or unable to make a move of faith to embrace belief in a Divine Being-- instead, choosing to make an explicit or implicit leap into the opposite inference. For the believer, it's a step of faith into light; for the non-believer, it's a leap of faith into the unknown.

Many professing theists are, practically, deists. They have a limited faith and worship a small god. If you worship a small god, when a larger God is the reality, then you will lead a pinched life.

Interestingly, the no-God and small-god groups are "conservative" in a significant sense-- both in terms of beliefs and actions. In contrast to a thriving faith in a big [real] God, they will imagine a smaller world [than is true]; they will have less imagination; their possibilities will be more limited. They will be less willing to investigate alternatives and they will have more fear of changing behavior.

If we are wrong, we believe that we're right-- and often act out on this pharisaically. A "liberal"-- whether theist, deist, agnostic, or atheist-- will be truly open to alternatives and will be tolerant of those who see things differently.

Wednesday, November 10, 2010

the disincentives of (various) marginal tax rates

I had a similar experience with playing violin in quartets after grad school. Facing a marginal tax rate of more than 50% (including mandated union dues!), it just wasn't worth it! Mankiw goes beyond that in talking about the impact of saving, compounded interest and taxes on capital gains and estates.

An important issue dividing the political parties is whether to raise taxes on those earning more than $250,000 a year. Democrats say these taxpayers can afford to chip in a bit more. Republicans say raising taxes on those who already face the highest marginal tax rates will hurt the economy.

So I thought it might be useful to do a case study on one of these high-income taxpayers. Fortunately, I have one handy: me. As a professor at Harvard and the author of some popular textbooks, I am comfortably in the income range that would be hit by this tax increase....

First, I have to acknowledge that the Democrats are right about one thing: I can afford to pay more in taxes....Indeed, I could go so far as to say I am almost completely sated. One reason is that I don’t aspire for much more than a typical upper-middle-class lifestyle....

Nonetheless, as Republicans emphasize, taxes influence the decisions I make. I am regularly offered opportunities to earn extra money....I acknowledge that my motives in taking on extra work are partly mercenary....to put some money aside for my three children...

Suppose that some editor offered me $1,000 to write an article....If I invested it in the stock of a company that earned, say, 8 percent a year on its capital, then 30 years from now, when I pass on, my children would inherit about $10,000.

...assuming that the Bush tax cuts expire, I would pay 39.6 percent in federal income taxes on that extra income. Beyond that, the phaseout of deductions adds 1.2 percentage points to my effective marginal tax rate. I also pay Medicare tax, which the recent health care bill is raising to 3.8 percent, starting in 2013. And in Massachusetts, I pay 5.3 percent in state income taxes, part of which I get back as a federal deduction. Putting all those taxes together, that $1,000 of pretax income becomes only $523 of saving.

And that saving no longer earns 8 percent. First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings. So I get only 5.2 percent in dividends and capital gains. Then, on that income, I pay taxes at the federal and state level. As a result, I earn about 4 percent after taxes, and the $523 in saving grows to $1,700 after 30 years.

Then, when my children inherit the money, the estate tax will kick in. The marginal estate tax rate is scheduled to go as high as 55 percent next year, but Congress may reduce it a bit. Most likely, when that $1,700 enters my estate, my kids will get, at most, $1,000 of it.

HERE’S the bottom line: Without any taxes, accepting that editor’s assignment would have yielded my children an extra $10,000. With taxes, it yields only $1,000. In effect, once the entire tax system is taken into account, my family’s marginal tax rate is about 90 percent. Is it any wonder that I turn down most of the money-making opportunities I am offered?

By contrast, without the tax increases advocated by the Obama administration, the numbers would look quite different. I would face a lower income tax rate, a lower Medicare tax rate, and no deduction phaseout or estate tax. Taking that writing assignment would yield my kids about $2,000. I would have twice the incentive to keep working.

Now you might not care if I supply less of my services to the marketplace — although, because you are reading this article, you are one of my customers. But I bet there are some high-income taxpayers whose services you enjoy....

Reasonable people can disagree about whether and how much the government should redistribute income. And, to be sure, the looming budget deficits require hard choices about spending and taxes. But don’t let anyone fool you into thinking that when the government taxes the rich, only the rich bear the burden.

Monday, November 8, 2010

post-election thoughts

With the 2010 election, the GOP controls the U.S. House with a solid majority, tightened up the Senate and made considerable gains at the state and local levels — from governors’ mansions to city councils.

In one sense, this is nothing new. It is common for the president’s party to lose seats in a mid-term election. In 1982, under President Ronald Reagan, Democrats increased their advantage in the House from 50 to 103 seats during a deep recession. But maybe this election points to something deeper, since change in party control has become more volatile.

In 2006, the GOP lost Congress because of disenchantment with the war in Iraq, high-profile scandals and the handling of Hurricane Katrina’s flood of New Orleans. In 2008, with a struggling economy, Barack Obama defeated John McCain and cemented the Democratic Congressional majorities. But two short years later, Mr. Obama and his Democratic Congress have been refuted in stunning fashion — as the economy continues to stumble and their efforts are seen as both spendthrift and ineffective.

Part of this is the gap between campaign promises and the ability to deliver. Activity is easy, but accomplishment is difficult. In particular, Congress, Mr. Bush and now Mr. Obama have been quite active in trying to fix the economy with three years of “stimulus” — politically tempting but economically dubious.

Government spending must come through taxes, debt or inflation. The chosen path over the last decade — more debt and the risk of inflation — leads to relatively subtle troubles. Meanwhile, other recent policies (most notably, health care reform) have made it more costly and more risky to engage in economic activity, impeding the market’s recovery from the Great Recession.

So, what can we make of this?

In sports, it’s often said that one team lost a game — rather than the other team won the game. The same can be true in politics. Victories for the Democrats in 2006 (and even 2008 to some extent) and for the Republicans in 2010 were more about one side losing than the other side winning. The electoral results are more about anti-incumbency and frustration with “Washington” than excitement about either major political party. If the GOP doesn’t give voters a reason to be supportive, the tables will turn again — and soon.

Let’s look more closely at three groups of voters.

• The Tea Party was a significant driver over the last two years. Its eclectic mix of (lower-case L) libertarians and various types of “conservatives” are fed up with particular aspects of public policy (e.g., health care), concerned about the economy (e.g., jobs, national debt) or more generally “dissatisfied with Washington.” Similar movements have arisen in the past — in recent memory, “Reagan Democrats” and support for Ross Perot in 1992 and 1996. Their concerns will be addressed or they will continue to vent. Republicans have an opportunity here, but are constrained in what they can do with economic policy, given the debt and the difficulties in cutting government spending.

• It has been said that younger people get much of their “news” through Jon Stewart, Steven Colbert and Comedy Central. Their “Rally to Restore Sanity” was a direct response to the Tea Party. What does the “Daily Show” generation want? As a group, they lean liberal politically, but their dominant characteristic is cynicism toward politics. On the surface, they might favor more government, but their underlying tendency is to have little faith in government.

• Some Republicans will push for efforts on social policy. But for better or worse, little of the current debate points to social policy. As is common in a recession, the focus is on the economy. Efforts to inject social policy into the political conversation will be awkward and might backfire.

For now, shared power in Washington probably means more gridlock and less “getting done ”— often a good thing. Sometimes it results in “compromise” — a mixed bag. Factions within both parties will make it even more difficult to govern. How will Congress and particularly Mr. Obama approach this challenge? Will he choose the path of a compromising Bill Clinton after 1994 or a contentious Harry Truman after 1946? Over the next two years, one side will be conciliatory or more likely, the time will be dominated by posing and positioning, going into 2012.

One more thought: Even though Truman, Dwight Eisenhower and Clinton lost control of Congress in their first mid-term elections, each of them was re-elected two years later.

Tuesday, November 2, 2010

Rhee and Fenty on education reform (in DC and beyond)

During our nearly four years in office we pressed forward an aggressive educational reform agenda. We were determined to turn around D.C.'s public schools and to put children above the political fray, no matter what the ramifications might be for ourselves or other public officials. As both of us embark on the next stages of our careers, we believe it is important to explain what we did in Washington, to share the lessons of our experience, and to offer some thoughts on what the rest of the country might learn from our successes and our mistakes....

For years, elected officials had promised parents and students that they would "fix the schools." But they failed to deliver, and the families of D.C. were left with finger-pointing and unkept promises. It wasn't that our predecessors were incompetent, or that we were the smart ones who had all the answers. Far from it.

But the political structure wasn't set up for a mayor and a schools chancellor even to make the kinds of decisions that were necessary. Once that new structure of governance was in place (D.C. instituted mayoral control of the public schools in 2007), we were able to chart a new course: to make all of the politically unpopular choices that had been put off for decades....

The great tragedy of the education debate in America is that most people know at least the basics of how to turn around our urban school systems....Nonetheless, year after year, our schools have been run for the benefit of the adults in the system, not for the benefit of the kids...

In September 2009, for example, we faced a significant challenge after a budget cut. To deal with the shortfall, the City Council had recommended that we cancel our summer school program. We knew, however, that getting rid of summer school would mean lower graduation rates and fewer students being on track academically. We looked at the numbers, and the school district was overstaffed for the number of students we served, with a teacher to student ratio of about 16-to-1. It is never easy when people lose their jobs, of course, but for us, the choice was clear: By cutting some staff, we could keep intact a critical program for our students. So we decided to conduct layoffs.

School districts traditionally lay off teachers using what's called the "last in, first out" principle, with the newer teachers let go first. But this is a classic example of putting the interests of adults above those of children....This did not sit well with many in the city, to put it mildly. In particular, it outraged the unions—and not just the teachers union....

But the longest and most difficult of our fights was the effort to reshape the district's teachers' contract. As in many other cities, D.C.'s contract tied the hands of principals, administrators and, yes, even teachers....

We bargained with the teachers' union for 2½ years and won significant concessions. How did we do it? By striking the sort of grand bargain that could serve as a model for other troubled school districts. The formula is really quite simple: more money and resources, in exchange for more accountability from teachers....

immigrants return to work faster; allow wages to drop faster

Two sides of the same coin. Markets adjust from "surplus" (unemployment in labor markets) with renewed demand (hasn't happened much) and reductions in wages/compensation. If wages are slow to fall (as they can be in labor markets), then unemployment can persist.

Unemployment insurance (UI) increases a tendency toward (longer-term) unemployment, by subsidizing those in that state. Immigrants are probably less likely to take UI and apparently, have a stronger work ethic.

Immigrants are returning to work quicker than their U.S.-born counterparts, but are earning significantly less than before the economic downturn, a Pew Hispanic Center study reported Friday.

Immigrants in the U.S. have gained 656,000 jobs since the Great Recession ended in June 2009. By comparison, U.S.-born workers lost 1.2 million jobs. The unemployment rate for immigrants fell over the same period to 8.7 percent from 9.3 percent. For American-born workers, the jobless rate rose to 9.7 percent from 9.2 percent....

The study said immigrant wages fell sharply in the last year, and that Latinos experienced the largest wage drop of any group. From 2009 to 2010, the median weekly earnings of foreign-born workers fell 4.5 percent compared to a loss of less than 1 percent for U.S.-born workers....

The center said the reasons immigrant unemployment is decreasing are unclear. But foreign-born workers are more mobile, they exit and enter the labor market more frequently, and are less likely to get unemployment benefits - so they may have to find jobs sooner, even if the jobs they are taking are worse...

You could have heard a pin drop.

At a time when our president and other politicians tend to apologize for our country's prior actions, here's a refresher on how some of our former patriots handled negative comments about our country.

JFK'S Secretary of State, Dean Rusk, was in France in the early 60's when DeGaulle decided to pull out of NATO. DeGaulle said he wanted all US military out of France as soon as possible. Rusk responded, "Does that include those who are buried here?" DeGaulle did not respond.

You could have heard a pin drop.

When in England, at a fairly large conference, Colin Powell was asked by the Archbishop of Canterbury if our plans for Iraq were just an example of 'empire building' by George Bush. He answered by saying, "Over the years, the United States has sent many of its fine young men and women into great peril to fight for freedom beyond our borders. The only amount of land we have ever asked for in return is enough to bury those that did not return."

You could have heard a pin drop.

There was a conference in France where a number of international engineers were taking part, including French and American. During a break, one of the French engineers came back into the room saying, "Have you heard the latest dumb stunt Bush has done? He has sent an aircraft carrier to Indonesia to help the tsunami victims. What does he intend to do, bomb them?" A Boeing engineer stood up and replied quietly: "Our carriers have three hospitals on board that can treat several hundred people; they are nuclear powered and can supply emergency electrical power to shore facilities; they have three cafeterias with the capacity to feed 3,000 people three meals a day, they can produce several thousand gallons of fresh water from sea water each day, and they carry half a dozen helicopters for use in transporting victims and injured to and from their flight deck. We have eleven such ships; how many does France have?"

You could have heard a pin drop.

A U.S. Navy Admiral was attending a naval conference that included Admirals from the U.S., English, Canadian, Australian and French Navies. At a cocktail reception, he found himself standing with a large group of officers that included personnel from most of those countries. Everyone was chatting away in English as they sipped their drinks but a French admiral suddenly complained that, whereas Europeans learn many languages, Americans learn only English. He then asked, "Why is it that we always have to speak English in these conferences rather than speaking French?" Without hesitating, the American Admiral replied, "Maybe it's because the Brit's, Canadians, Aussie's and Americans arranged it so you wouldn't have to speak German."

You could have heard a pin drop.

Robert Whiting, an elderly gentleman of 83, arrived in Paris by plane. At French Customs, he took a few minutes to locate his passport in his carry on.

"You have been to France before, monsieur?" the customs officer asked sarcastically. Mr. Whiting admitted that he had been to France previously. "Then you should know enough to have your passport ready." The American said, “The last time I was here, I didn't have to show it." "Impossible. Americans always have to show their passports on arrival in France!" The American senior gave the Frenchman a long hard look. Then he quietly explained, ''Well, when I came ashore at Omaha Beach on D-Day in 1944 to help liberate this country, I couldn't find a single Frenchmen to show a passport to."

About Me

First and foremost, I am saved by God's grace as manifested most clearly through the atoning death of Jesus Christ-- and thus, adopted into His family. As a result, I increasingly seek to extend His grace to others in my daily life. On the home front, I am a husband and father to four young boys (two by adoption and two the more conventional way). Professionally, I am an economist who loves to teach and is active in public policy circles. Vocationally, I am an active writer and the author of three books (one on the book of Joshua; two on public policy-- one secular, one Christian). Finally, I am the co-author of a 21-month discipleship curriculum, Thoroughly Equipped, for developing competent lay-leaders in the Church.